What is 'Concealment'

Concealment is omission of information that would affect the issuance or rate of an insurance contract. If the insurer has no access to the information and the information is material, the insurer can nullify the contract or refuse to pay out on claims related to the concealed information.

BREAKING DOWN 'Concealment'

Concealment applies any time an insured party fails to provide information to an insurer that could affect the terms of the policy. Note that this includes situations in which an insurance company does not ask a direct question about the information in question.

For example, most automobile coverage policies require a list of all members of the household who are old enough to drive a car. Young drivers, drivers who experience multiple accidents and drivers convicted of driving under the influence of drugs or alcohol can wind up raising the premiums for a household’s auto insurance. If a policyholder failed to indicate the presence of other adults in the household, an insurer would consider that concealment. If one of those adults subsequently got into an accident and the policyholder attempted to file a claim, the insurer would have grounds to refuse to pay if it discovered the policyholder had withheld the information.

Concealment compared to misrepresentation

Insurance policies generally lump concealment in with misrepresentation as a reason to void or alter a contract. Misrepresentation involves actively providing incorrect information to an insurance agent when purchasing a policy, while concealment technically involves neglecting to provide information that would change the terms of the policy if provided. Whether a policyholder is found to have misrepresented or concealed salient information purposely or by accident, insurers reserve the right to alter or void policies when the omission or misrepresentation is discovered.

For example, a person shopping for a life insurance policy usually must answer a series of questions about their health, including information about whether or not they engage in potentially harmful activities. Smokers have a higher likelihood of encountering health issues than non-smokers, so many policies request information about whether or not a policyholder smokes tobacco products or has a history of smoking. Suppose the policyholder was a regular smoker for a time but quit ten years ago. If they marked no in answer to a question about having a history of smoking, they would be engaging in misrepresentation. If the application instead asked an open-ended question about a person’s health history and the individual failed to mention smoking, that would be concealment. In either case, if that person wound up dying of lung cancer or emphysema, the insurance company could deny payment of a life insurance claim if it discovered that individual’s history of smoking.

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